Proportion Of Reserves Soaked Up By Repos Jacks Up To Record 94% Last Night

And on inversions, reinversions, normalizations, renormalizations, innies, outies, ziggies and zaggies...and fever hallucinations apparently. And the gold bottom is likely in yesterday.

Hat Tip Craig Hemke and Chris Marcus

Craig Hemke had the opportunity to speak to the man, the legend, Daniel Oliver, yesterday. Chris Marcus (here's his substack) alerted me, because he knows I have a monetary crush on the man. Luckily, my youngest (6) woke us both up last night with a high fever at about 1am, hallucinating about "that, the thing on the wall" over and over and my wife dunked her in a warm bath and did the hydration thing and she's recovering now thank God. So, up at 1am and frazzled about fever hallucinations, I saw Chris's message and listened to the interview.

Oliver always says something that surprises me. This time it was his view of the differences between the 2008-2011 gold rally and today's. He said that back then, many were convinced hyperinflation was just around the corner, and cited examples. This time, most are not talking about hyperinflation, and the ones that are are considered crazy kooks, like me. In Oliver's view, this makes the current rally much more sustainable. Take a listen at the first link above.

Repos to Reserves Crisis Ratio Exceeded at Whopping 94%

Depending on how exactly it's measured, the proportion of available bank reserves being sucked up in the repo market to sustained 50x plus leveraged basis trades is now somewhere between 82.7% and 94%. If we take the week average of bank reserves, we get 82.7%, see below.

But if we take Thursday's level of repos which was an explosive record-breaking $2.83 trillion…

…and divide that by Wednesday's level of bank reserves (the latest spot data we have)…

…we have $2.83 trillion / $3.00 trillion, an unbelievable 94%.

The 94% number is slightly artificial because it occurred at the end of the month, when banks stuff as much cash as they possibly can into the reverse repo facility (outside of bank reserves) and off their balance sheets in order to look "leaner" for regulators, whatever that means. This, in combination with post Tax Day highs in the Treasury's account at the Fed (which leaches from reserves also, so the higher it is, the lower reserves are), combined to push reserves down temporarily to the $3 trillion level. But as we head out of the month-end turn and the Treasury spends down more of its balance post Tax Day, reserves should head back up and repo volume should head back down, pushing the ratio back down for a while.

But the trend is clear. The ratio keeps ratcheting higher and higher, and we will get to a point where we consistently hit 83%, and a repocalypse should occur soon after that.

Silver Still On Pace for Record Deliveries

At this point in the month for July 2020, comes silver had